Thoughts on Solar by Run on Sun's Founder & CEO, Jim Jenal

Our first post on the new SCE rate structures revealed that there were big changes coming to Residential customers.  In this post we will look a little closer at how those changes will affect your bill.

As we explained before, SCE’s new Domestic rate structure changes baseline allocations and completely eliminates the dreaded Tier 5.  Instead, the price of energy at Tiers 3 and 4 went up sharply (6.3% and 7.2% respectively) while summertime allocations generally declined.  (We didn’t discuss it in our previous post because it doesn’t affect that many SCE customers, but allocations for “all-electric” homes dropped dramatically, as much as 35% or more!  If you are in an all-electric home, you better be generating your own electricity!)

But the changes in the rate structure are complex - after all, non-summer allocations often increased and without Tier 5 it figured that some customers - those who use a great deal of energy - would actually benefit from the change.  We decided to find out.

Methodology

To assess the impact of the new rate structure, we modified our old SCE Domestic rate model (which we have used to estimate future savings from installing solar) to reflect the rate structure changes: new baseline allocations and the elimination of Tier 5 in return for modifications to the lower Tier rates.  Now we had two models - one based on the “2012 Historical Rates” and the other based on the new rates effective April 1, 2013.

Since the allocations vary by region, we chose Region 9 (which covers the cities surrounding Run on Sun such as South Pasadena and San Marino) as the home for our representative SCE customer.  We then ran our models based on a daily usage ranging from 10 kWh (way less usage than any single-family home in either of those cities) all the way up to 70 kWh (greater usage than all but the largest properties).  To account for summertime loads, we increased the daily usage by 50% for the months of June through September (a generally conservative estimate, especially as daily usage increases).

Winners and Losers

Here are our results (click for larger):

Despite the presence of four (or five for 2012) different rates, the actual graph is almost entirely flat, except for usage at the very bottom end of the scale.  Fairly early on, we see the 2013 rates bend up above the values from 2012 with the greatest increases between 18 and 36 kWh daily usage (more on that in a moment).

As predicted, however, the rate increase is actually a rate reduction - if you happen to own a mansion or are running a whole bunch of Grow Lights.  Indeed, for folks way out there on the right edge of this curve, they will see their annual energy costs decline by more than 1%!  How nice for them.

But how did the rest of us do?  Let’s zero in a bit on where the middle class lives and see what their rates look like - check this out:

For this graph we have restricted our usage values to the range of 18-36 kWh and narrowed the scale of our cost axis to start at $1,000 instead of $0.  The resulting “magnification” shows who is shouldering the bulk of this rate increase.  Customers in this band will see rate increases this year of anywhere from 2.88% to 4.85% (at 28 kWh), and keep in mind this is just one year of a multi-year rate increase plan.

Who are these lucky folks?  Well, in terms of potential solar clients, their system needs would range from 3.6 kW (just above our minimum system size) to 7.2 kW - in other words, the “sweet spot” of our potential residential clients.

So what is our takeaway from this analysis?  Well, as is seemingly commonplace these days, if you are  in the middle you are getting squeezed.  Folks on the low end mostly get a pass while folks on the high end are actually getting a break!  But if you are in the middle, it is your pocket that is getting picked.

Installing solar is your best hedge against the clever targeting by the team, no, make that the legion of lawyers and economists employed by the utilities to design these rate structures.  We cannot stop their scheming, but we can certainly assist you in fighting back!  Give us a call today, or better yet, fill out our online form and let’s put this new rate model to use in saving you some money!

Coming up later this week: how the new rate structures affect commercial customers.

In November we wrote that SCE’s rates were set to climb on average by more than 17% over the next three years.  Now we are starting to see how those rates are about to change and the differences are indeed dramatic.

In a 500+ page filing with the California Public Utilities Commission (CPUC), SCE documents major changes to both residential and commercial rate structures that will change how, and how much, SCE’s customers will pay in the coming years.

We will be breaking this filing down over time, but for a start, let’s look at changes for residential customers.

Changing the Baseline

Most residential customers of SCE pay according to Rate Schedule D (for ‘Domestic’) that charges based on a tiered structure.  At the bottom of the tier is the so-called baseline allocation - an amount of energy use per day allowed based on where the customer resides.

As SCE explains it on their FAQ page:

Baseline was never intended to cover 100% of average residential use, but rather to provide a significant portion of the reasonable energy needs to be charged at the lowest rate, and to encourage conservation of energy.

The CPUC established that the baseline quantities be allocated at 50% to 60% of average residential consumption for basic services such as lighting, cooking, heating and refrigeration, except for residential gas and all-electric residential customers, the baseline quantity is established at 60% to 70% of the average residential consumption during the winter heating season.

Under SCE’s new Domestic rate structure, baseline allocations will drop from their present 55% down to 53% of the average residential consumption.  Since all other aspects of the rate structure are dependent on the baseline allocations, these seemingly small drops can have a significant impact on how much a residential customer ultimately pays.  However, the baseline allocation reductions are an average over the entire customer base - some customers will see their allocation increase while others will see theirs go down.

Here’s a table showing old allocations versus new ones for customers in the Run on Sun service area:

Most everyone sees their allocation increase in the winter period - precisely when most of us need it the least.  But if you live in the San Gabriel Valley - where the vast majority of our clients do - you will see a real drop in your daily baseline allocation and folks in the Pasadena area are especially hard hit.  (NB: Customers of Pasadena Water and Power are not affected by this change - only those who get their electrical service from SCE.)

Overall, for SCE’s nine different regions, six will see a reduction in their baseline allocation during the summer season while three will see increases.  For the remainder of the year, one region will see their allocation go down, six will see it go up and three will remain unchanged.

Is Anyone Shedding Tears Over Fewer Tiers?

SCE’s old residential rate structure had five tiers: baseline (or Tier 1), Tier 2 (usage of the next 30% beyond baseline), Tier 3 (usage between 131 and 200% of baseline), Tier 4 (usage between 201 and 300% of baseline) and Tier 5 (all usage beyond 300% of baseline).  At each Tier, the cost increased substantially.  Whereas a kilowatt-hour of energy within your baseline allocation was charged at the (relatively) modest rate of just 12.9¢, that same kilowatt-hour in Tier 5 would cost 32.6¢ - more than two-and-a-half times as much!

Going forward, Tier 5 is eliminated altogether - which sounds like good news until one realizes that the cost of Tiers 3 and 4 are going up, and for customers with reduced baseline allocations in the summer, they will get into those tiers much sooner.

Here’s how the new rates compare:

While the two lowest tiers are essentially flat, Tier 3 goes up by 6.3% whereas Tier 4 jumps 7.2%.

But surely with Tier 5 eliminated altogether, some customers must do better under the new rate structure, right?  Ah, that is a question for another day, but wouldn’t a graph showing annual electric bills under the old and new domestic rate structure be something interesting to see?

We thought so to - that’s coming next time.

A company controlled by Warren Buffett’s Berkshire Hathaway - MidAmerican Energy Holdings - has announced that it will pay SunPower between $2.0 and $2.5 billion for the 579 MW Antelope Valley solar projects.

Shares of publicly-traded SunPower (SPWR) jumped on the news and closed the week at $8.73, up 2.6 times over its 52-week low.

MidAmerican had previously purchased a 49% stake in a 290 MW solar project in Arizona and the FirstSolar Topaz Solar Farm (590 MW) in California.  The Antelope Valley project will sell power to SCE under two long-term contracts.

The announcement was certainly good news for SunPower which, like other manufacturers of solar power modules, has struggled in the last year as modules prices have continued to fall.

Of course, falling module prices - while extremely painful for module makers - is good news for installers and their clients.  That said, we do not anticipate significant drops in system prices during 2013 and with rebates continuing to decline, waiting to buy is not likely to be a rewarding strategy.

Or at least so Mr. Buffett seems to think.

The California Public Utilities Commission (CPUC) just approved a modified rate case for Southern California Edison (SCE) that will guarantee rate increases for the next three years.  According to an article discussing the decision by Marc Lifsher in the LA Times, SCE’s rates will increase on average by 5% this year.  But that is just the start of the bad news for SCE ratepayers - SCE’s rates will increase by 6.3% for next year and by an additional 5.9% in 2014!

According to a press release put out by the CPUC, SCE has twenty days to file new tariffs with the CPUC which will become effective immediately.

For a commercial SCE customer who presently pays roughly $10,000/month, they can expect to be paying $11,720/month once the three rate increases take effect - an increase of more than $20,000/year.

There can be no doubt that comparable - or higher - rate increases will continue.  Adding a solar power system to your business or home is easily the best hedge that you can have against such one-way cost increases.  Give us a call (626-793-6025) or click on that big Sun on the right and let’s get started today at putting you in charge of your energy future.

SB 843, the proposed law that would have allowed for Community Solar installations, has been defeated.  Faced with unyielding opposition from Pacific Gas & Electric (PG&E) and Southern California Edison (SCE), the bill was killed in the Utilities and Commerce committee of the Assembly.

Community Solar allows renters, home owners with undesirable roofs, or businesses that don’t own their own buildings to “go solar” by owning a piece of the output of a community solar installation.  Since a large percentage of potential solar clients fall into those circumstances, the concept of community solar is extremely appealing.  (Over the years, we have had numerous potential clients that we have had to turn away because their site would simply not support a viable solar installation.  These people would be natural participants in a community solar project.)

Indeed, the list of organizations supporting the bill contrasts sharply with those opposing:

Support for SB 843 (Wolk)

Education
Superintendent of Public Instruction, Tom Torlakson (Co-sponsor)
California School Board Association
County School Facilities Consortium (CASH)
Davis Joint Unified School District
Firebaugh-Las Deltas Unified School District
Fowler Unified School District
Los Angeles Unified School District
Oakland Unified School District
Petaluma City Schools
School Energy Coalition
Yolo County Board of Education

Military
Department of Defense

State and Local Government
City of Davis (Co-sponsor)
City of Chula Vista
City of San Diego
City of San Jose
City of Ventura
County of Sonoma
Jean Quan, Mayor, City of Oakland
Keith Carson, Supervisor 5th District Alameda County

Community & Environmental Justice Groups
Advancement Project
Affordable Housing Alliance
Asia Pacific Environmental Network (APEN)
Black Women For Wellness
Californians for Clean Energy & Jobs Network
CleanTECH San Diego
Coalition for Humane Immigrant Rights of Los Angeles
Community Coalition
East Yard Communities for Environmental Justice
Ella Baker Center
Korean Resource Center
Kyoto USA
Leadership Management Institute
Los Angeles Community Action Network
Oakland Rising
Physicians for Social Responsibility – Los Angeles
Silicon Valley Leadership Group (SLVG)
Vote Solar
William C. Velásquez Institute

Environmental Advocates
California League of Conservation Voters
California Native Plant Society
Community Environmental Council
Environment California
Environmental Defense Fund
Natural Resources Defense Council
Planning and Conservation League
Sierra Club California
Union of Concerned Scientists

Faith Community
California Interfaith Power & Light
Chapel of Peace Lutheran Church, Inglewood

Utility
San Diego Gas & Electric

Business
Blueray Curtiss
Botanical Labs
Cauac Inc.
Christiansen Consulting
Cynthia Washburn Catering
Environmental Entrepreneurs (213 members)
Green Build Energy
Los Angeles Business Council (LABC)
LMI of San Diego
LTS Energy
PaulinNeal
Poetic Kinetics
Rabobank North America
Ritual Coffee Roasters
Small Business California
Swinerton Builders

Solar/Renewable Energy
AmSolar
Androit Solar Energy Design
Black Rock Solar
CleanPath Ventures
Clean Tech Energy
El Pico Energy LLC
Lincoln Renewable Energy
Octus Energy
Recurrent Energy
Renewable Funding
Run on Sun
San Diego County Solar
Solar City
Solar Energy Industries Association (SEIA)
Solar Mosaic
Solar Pathways
Solar West Design
Sologico
Sungevity
Sun Run
SunTech
Tioga Energy
Yingli Green Energy Americas, Inc.

Labor
California Building Trades Council
California State Association of Electrical Workers (IBEW)
California Teamsters
Coalition of California Utility Employee
Homeboy Enterprises
LA/Orange Counties Building and Construction Trades Council
Oakland Tech Green Academy
Solar Training Institute
Winston Burton, Exec. Director of the Workforce Collaborative

Health
American Lung Association of California
Breathe California


Opposition for SB 843 (Wolk)

California Farm Bureau Federation
Pacific Gas and Electric Company
Southern California Edison

Unfortunately, an appealing concept with broad support can still be extremely difficult to turn into practical legislation, and with the end of the session looming, there simply was not enough time to get this bill across the finish line - despite heroic efforts by many dedicated solar advocates.

But I’m a Dodgers fan, and we are accustomed to the refrain, “wait ’til next year."  Accustomed, but not resigned, that is.  So next year, when this measure is re-worked and re-introduced, we intend to be on it from Day 1 and we will be encouraging all of you to make your voices heard early and often so that we can finally get this done.